Focus on Applications

The cloud emerges as a serious contender for companies interested in IT outsourcing.

When it comes to offshoring, cloud computing also stands to challenge traditional thought in another big way. Since the first step in preparing for cloud computing is making sure that applications can actually run on a cloud, many companies will need to remediate their proprietary applications - a labor-intensive activity that may have them looking for the lowest-cost labor market.

Not so fast. Since the cloud-worthy applications are often the ones that drive competitive advantage, companies won't want their trade secrets in the hands of a remote processor overseas. Instead, they'll want to keep these applications close to the vest.

Say, for example, an insurer needs to rewrite its software that weighs the risk of potential customers. Or an agricultural products company has an application that determines how to process raw materials to match consumer demand. Companies will want to use local people to reengineer these strategic applications for the cloud. So instead of offshoring the work as usual, the industry once renowned for sending jobs overseas may start to bring them back home.

Easier implementation

Finally, cloud computing may also pave the way for smoother transitions in outsourcing. In traditional ITO, service providers almost always have to build additional capability to accommodate a customer's processes. But in cloud computing, the environment - the cloud - is already built, and it can be ramped up or down based on the company's needs.

In addition, cloud computing can streamline relationships involving multiple providers. Gone is the pain, for example, of adapting the helpdesk provider's trouble-ticketing system to also work for the data-center provider. In cloud computing, that trouble-ticketing system would be written for the Internet, so anyone can use it. That minimizes risk for all parties and improves service delivery.